TALKING BUSINESS; Carly Fiorina's Revisionist Chronicles

By JOE NOCERA

Published: October 14, 2006

CORRECTION APPENDED

''Here's what the firing was not about,'' Carleton S. Fiorina told Damon Darlin of The New York Times this week. ''It was not about performance.''

The firing to which Ms. Fiorina was referring, of course, was her own. It took place in February 2005, when she was dismissed as the chief executive of Hewlett-Packard by the company's ''dysfunctional board,'' to use her words. Ms. Fiorina, universally known as Carly, wasn't just any chief executive, either; she was the highest-profile female executive in the country, the perennial top choice for Fortune magazine's ''50 Most Powerful Women,'' and a celebrity C.E.O. who was to the business media what Paris Hilton is to the tabloids. Her firing was a very big story at the time.

And all of a sudden, it is again, thanks to the publication of her memoir, ''Tough Choices,'' which came out on Monday. (Disclosure: I have a book contract with Portfolio, which is also Ms. Fiorina's publisher.) By a stroke of publicity luck, her memoir landed in bookstores smack-dab in the middle of the H.P. ''pretexting'' scandal, which, besides being front-page fodder for days, proved beyond a shadow of a doubt that the Hewlett-Packard board was, indeed, dysfunctional, just as Ms. Fiorina contended. Which is also why her insistence that her own firing, by that same board, was unjustified, has also often been taken at face value.

''The company was transformed under my leadership,'' Ms. Fiorina told the ever-credulous Leslie Stahl on ''60 Minutes'' this week, for instance. ''Because of her management skills, her vision,'' Ms. Stahl said. When they got to the firing, Ms. Stahl said, ''It was as if they intended to bring you down.'' Ms. Fiorina: ''If that was their intent, they certainly succeeded.'' Et cetera. Et cetera.

So I come here this Saturday morning to offer a simple corrective. Carly, it was about performance. And if you didn't realize that then -- and can't admit it now -- you should never have been Hewlett-Packard's chief executive in the first place.

TO hear Ms. Fiorina tell it in her memoirs, by December 2004, after five-plus years at the helm of Hewlett-Packard, she had finally turned the ship around. Sure, the company had missed its third-quarter earnings estimates. But no worries! ''Our fourth-quarter 2004 performance was strong,'' she writes, ''with record revenues in every business and the most balanced profitability across the portfolio since the merger. For the full fiscal year, despite our third-quarter stumble, we'd grown revenues by 9 percent, to $80 billion, and generated a record $5 billion in profit from operations.''

That's not all. The strategy was in place for a great 2005, she writes, and the board had signed off on it -- unanimously. The company was streamlined, employees were motivated, the right executives were in the right jobs, the effects of the contentious 2002 Compaq merger were kicking in, and her various initiatives -- every one a mouthful: The Leadership Framework; Achieving Benchmark Cost Structures; Accelerating Go-To-Market Effectiveness; and so on -- were reviving this once-moribund company.

Alas, that's not how the rest of the world remembers it. That third-quarter earnings shortfall? It wasn't a small miss; it was a monstrous miss -- H.P. missed its earnings projections that quarter by 7 cents, or 23 percent. When companies miss by a few pennies, it doesn't mean all that much. When companies miss by 23 percent, Wall Street starts wondering if the people at the top have a clue as to what's going on in the various businesses.

In her memoir, Ms. Fiorina says H.P. missed its numbers on her watch only three times; in fact, the company fell short at least nine times on either revenue, profit or both. She also talks repeatedly in ''Tough Choices'' about the importance of setting targets and goals that make sense, and perhaps, during her time as a rising star at Lucent, she did that. But at H.P., she set goals that were out of touch with the reality of the company's businesses. ''When she first took over,'' said Charles Wolf, an analyst at Needham & Company, ''she promised revenue growth and improvement of metrics that she didn't come close to meeting.'' Right up until the end, that was too often the case.

The earnings numbers, though, tell only part of the story. ''From the time she came to the time she left,'' said Benjamin Rosen, the former venture capitalist and Compaq chairman, ''based on the organization she built, the performance of the company, and the return to shareholders, it was not a good report card.''

The stock declined 50 percent during the five and a half years she was in charge. Although she said she was making employees accountable, she put in place an organizational chart with so many overlapping responsibilities that nobody seemed to be in charge. She larded the place with bureaucracy. She merged the highly profitable printer division with the struggling personal computer division, another questionable move.

And then there was Ms. Fiorina herself. ''The title of the book should have been, 'It's all about me,' '' said Mark R. Anderson of Strategic News Service, which focuses on technology and communications. Almost everyone I interviewed for this column said something similar. People recall the rock stars she brought on stage when she made big presentations, and her inability to breed loyalty among the executives she surrounded herself with. ''She was a huge blame game devotee,'' said Jeffrey A. Sonnenfeld of the Yale School of Management. Ultimately, she was selling Hewlett-Packard by selling herself -- and inside H.P. all it bred was resentment.

Correction: October 20, 2006, Friday
The Talking Business column on Saturday about the book ''Tough Choices,'' by Carleton S. Fiorina, which recounts her dismissal as chief executive of Hewlett-Packard in February 2005, misspelled the given name of the ''60 Minutes'' correspondent who recently interviewed Ms. Fiorina. She is Lesley Stahl, not Leslie.